Property Tax Post: Legoland California to County Treasurer—Play Well


Legoland California, a 128-acre theme park in Carlsbad, Calif. geared toward LEGO enthusiasts is accusing the San Diego County treasurer and tax collector of not playing well, according to an article in the San Diego Union Tribune. The term LEGO derives from two Danish words meaning “play well” according to the theme park’s website.

Legoland was hit with a delinquency penalty of more than $92,000 after its property tax installment payment of $927,114 was considered to be delinquent by the county treasurer, who assessed a 10 percent penalty. Legoland subsequently filed suit against the county to recoup the penalty.

Legoland insists that the error was justified—“the case of the missing zero,” says the article. Specifically, Legoland argues that the penalty was erroneously assessed because the payment was only delinquent because a zero was inadvertently left off the company’s bank account number when it paid online.

The county treasurer says that when delinquency is caused by the taxpayer’s own error, a penalty is justified, according to the article. The treasurer compared the situation to one where a taxpayer writes a bad check but argues that they paid on time.

A major problem for Legoland is that California’s property tax delinquency penalty provision is straightforward and concise. All taxes due are considered delinquent if unpaid by close of business on the installment due date, and if unpaid, a delinquency penalty of 10 percent attaches.

Legoland is therefore essentially arguing for a good faith exception to the rule, even though one is not contained in the statute itself. If one existed, the case would be stronger—Legoland said it got an immediate e-mail confirmation receipt after paying online, but didn’t get a notice about the error until a few weeks later, by regular mail, according to court documents.

Legoland also argues that the penalty violates the 8th Amendment’s prohibition on excessive fines. While $92,000 seems excessive based on a simple error like a missing zero, Legoland will also likely have difficulty in convincing a court that the penalty provision is unconstitutional, because California is not alone in imposing such a penalty.

For example, a handful of other jurisdictions, including Arkansas, the District of Columbia and Ohio also impose 10 percent penalties. Alaska allows a penalty of up to 20 percent, and Nevada has a “repeat offender” rule—the penalty starts at 4 percent and increases by 1 percent for each missed installment up to 7 percent.

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Should states include good-faith exceptions to their delinquency penalties? Should the actual amount of the penalty be considered rather than a flat percentage?

Sign up for a free trial of the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state property taxes.